Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Waterfall definition

What does Waterfall mean? In legal practice, a waterfall is the order in which available funds are applied to debts when insolvency, enforcement or a payment default occurs. It describes who gets paid, in what sequence, and from which recoveries. ‘Waterfall’ is not a statutory term; it is a descriptive and contractual concept. The underlying order of priority may arise from legislation and case law (the statutory insolvency waterfall) or from contract (for example, in intercreditor agreements, security trust deeds and structured finance documents). Typical features include: specifying categories and sequencing; earmarking particular proceeds; and dealing with turnover, set-off and subrogation. In practice it allocates...

Bankruptcy Distribution Waterfall and Order of Priority under IA 1986 and IR 2016: Expenses, Preferential (including HMRC), Unsecured, Interest, Deferred Debts and Surplus (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Once secured creditors have been satisfied, the trustee in bankruptcy (trustee) must allocate the remaining estate in line with the prescribed order of payment.

Expenses

To begin with, the trustee must meet the costs and expenses of the bankruptcy. The insolvency (England and Wales) rules 2016 (IR 2016), SI 2016/1024, r 10.149 specify that bankruptcy expenses are payable from the bankrupt’s estate in this order:

expenses or costs which:
- are properly chargeable to, or incurred by, the official receiver (OR) or the trustee in safeguarding, realising or recovering any of the bankrupt’s assets, or otherwise relating to the conduct of legal proceedings which the OR or trustee has power to bring or defend (whether the underlying claim forms part of the bankrupt’s estate or not)
- concern the engagement of a shorthand writer, where appointed by a court order made at the OR’s instance in connection with an examination
- are incurred in holding an examination under IR 2016, SI 2016/1024, r 10.102 (examinee unfit) where the application was made by the OR
any other expenses incurred or disbursements...

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Web page updated on 12/06/2026

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